The density form of equilibrium prices in continuous time and Boiteux's solution to the shifting-peak problem

Horsley, Anthony and Wrobel, Andrew J.
(1999)
The density form of equilibrium prices in continuous time and Boiteux's solution to the shifting-peak problem.
TE,
371.
Suntory and Toyota International Centres for Economics and Related Disciplines, London School of Economics and Political Science, London, UK.

Abstract

Bewley's condition on production sets, imposed to ensure the existence of an equilibrium price density when L? is the commodity space, is weakened to allow applications to continuous-time problems, and especially to peak-load pricing when the users' utility and production function are Mackey continuous. A general form of the production sets with the required property is identified, and examples are given of technologies which meet the weakened but not the original condition: these include industrial use and storage of cyclically priced goods. General equilibrium results are supplemented by those for prices supporting individual consumer or producer optima. Also, to make clear the restriction implicit in Mackey continuity, we interpret it as interruptibility of demand; and we point out that, without this assumption, the equilibrium can feature pointed peaks with singular, instantaneous capacity charges.